It’s easy to use rightmove and an annuity calculator to work out in your local area a straightforward comparison between going the traditional pension route or saving up and buying a rental property instead.
The figures below are very high level but you can easily factor in more detail if you wish.
But the messages are clear:
With a house rental you could get 50% more income currently than you would with a pension
That income would be inflation proofed assuming rents went up broadly with inflation
You keep your capital in the house and hence could sell it and realise that capital at any time
With a pension you hand over your money to a pension provider and never see it again. If you die after retirement your pension provider keeps the remainder of your money. With a property when you die then the capital remains in your estate.
It’s more work obviously and charges, bad tenants, repairs can eat away at the income. But food for thought !!!
An alternative might be to buy a property when you retire then when you get to 80 sell it and buy an annuity then, you’ll get a much better deal at that age.
Here is the maths in our local area:
Modern, low maintenance 2 bed apartment leasehold:
purchase price – £135k
rental income – £8,700 per annum
equivalent pension income for £135k pension pot – £5,082 per annum
Modern, low maintenance 2 bed house freehold:
purchase price – £170k
rental income – £9,000 per annum
equivalent pension income for £170k pension pot – £6,400 per annum
Modern, low maintenance 3 bed house freehold:
purchase price – £210k
rental income – £10,800 per annum
equivalent pension income for £210k pension pot – £7,900 per annum